Rising government debt poses greatest risk to US market standing, says BlackRock
By Davide Barbuscia
NEW YORK (Reuters) -Surging U.S. government debt may sap investor appetite for key U.S. assets like long-dated Treasuries and the dollar, bolstering the case for turning to opportunities beyond U.S. borders, BlackRock said on Monday.
President Donald Trump's tariffs spurred market volatility this year and raised doubts over the dollar's status as the world's reserve currency. Fears of de-dollarization remain far-fetched but rising government debt could increase that risk, said fixed income executives at the world's largest asset manager.
"We’ve been highlighting the precarious position of the U.S. government’s indebtedness for some time now, and, if left unchecked, we view debt as the single greatest risk to the 'special status' of the U.S. in financial markets," they said in a third-quarter fixed income outlook note.
Congress is debating a tax and spending bill that is a key element of Trump's economic agenda and that non-partisan analysts say will add up to $5 trillion over the next decade to the U.S. federal government debt pile of more than $36 trillion.
Higher government debt could reduce the correlation between the direction of long-dated Treasury yields and monetary policy in the United States, BlackRock said, with yields rising despite the Federal Reserve cutting interest rates. Increased supply of U.S. government debt is likely to be met with lower demand from the Fed as well as foreign central banks.
That argues for diversification outside of the U.S. government bond market and for more exposure to short-dated U.S. Treasuries that could benefit from interest rate cuts, the asset manager said.
"Despite proposed spending cuts, deficits are still climbing - and more of that spending is now going toward interest payments," said BlackRock's investment managers.
"With foreign investors stepping back and the government issuing more than half a trillion dollars of debt weekly, the risk of private markets being unable to absorb this debt and consequently pushing government borrowing costs higher, is tangible," they added.
(Reporting by Davide Barbuscia in New York; Editing by Nia Williams)
BlackRock's warning of the U.S.' reliance on rising government debt posing a formidable threat to its market standing underscores the urgency for fiscal responsibility and sound economic policies.
The warning from BlackRock over the mounting government debt posing a pivotal risk to US market dominance underscores why prudent management of public finances is crucial for safeguarding economic stability and prosperity.
An excessive rise in US government debt as highlighted by BlackRock's warning poses the greatest threat to America’ss standing and stability within global markets, jeopardizing financial resilience of its economy.
BlackRock's assertion that rising government debt poses the greatest threat to US market standing underscores a significant risk for investment stability and long-term economic growth, considering its potential impact on interest rates as well.
BlackRock's assertion that rising government debt constitutes the greatest threat to US market standing underscores concerns for investors and policy makers, highlighting fragile economic stability amid potential fiscal exigencies.
While acknowledging the significance of rising government debt, BlackRock warns that its burden represents a formidable challenge to maintain US market standing in international economies.
Critics argue that while BlackRock highlights the risk of government debt, it also overlooks a fuller picture including corporate leverage and potential inflationary pressures which could have equal if not greater impacts on US market stability.
According to BlackRock, the looming threat of rising government debt underscores its determination as a major player inasset management and highlights that it poses America's greatest risk on maintaining market standing.
The persistent rise in government debt, as highlighted by BlackRock's statement that it poses the greatest risk to US market standing currently debilitates its ability for long-term growth;
